Trade and Industry

The paper considers new heterodox theoretical contributions to the industrial policy debate in developing countries. Specifically it focuses on the challenge of “getting industrial policy right in circumstances where the country is run by flawed leaders presiding over a politically weak and internally fragmented state” (Change 2010). The paper covers new theoretical thinking on:1) institutions, their quality, how they came to be and the direction of the causality between institutional improvement and economic growth and wealth creation; 2) business state relations and the need to ensure that IP instruments are compatible with existing political power balances; and 3)the capacity and capability of the bureaucracy and the role it plays in ensuring that the state can be embedded with business but not captured by its interests. The paper concludes with some case study examples of interesting IP initiatives, which demonstrate some of this new IP thinking. Examples include the implementation of second best institutions; a process approach to IP in which industry and government make joint discoveries of areas of global competitiveness; thinking about IP at a specific product level; and the islands of excellence work around solutions in cases in which a bureaucracy is constrained.

The 2007 launch of the National Industrial Policy Framework (NIPF) and the Industrial Policy Action Plan (IPAP) could not have anticipated the impact that the global financial crisis of 2008/2009 and subsequent recession would wreak on South Africa’s economy. With its strong focus on the manufacturing sector as a key driver of balanced development, the NIPF set a framework and an implementation mechanism – in the form of IPAP ­– for addressing cross-cutting and sector-specific constraints (and optimising opportunities) to put South Africa on a stronger growth path. As it turned out, it also assisted in shoring up the South African industrial sector against the worst effects of the recession, particularly through support for industrial upgrading, local procurement designations and export facilitation. This policy brief explores the intended outcomes of the NIPF and assesses some of the progress (and unintended consequences) achieved in implementing IPAP since 2008. It concludes with some recommendations on the need to do a full review of the impact and implementation of IPAP.

The roots of the industrial conflict in the North West province platinum mining belt in 2012 that led to the Marikana massacre cannot be found in the normal narrative of low wages and circular migrant labour entrenched under apartheid. Although South African miners earned far less than their equals in industrialised economies, their median wage was around twice as high as in other sectors in South Africa. Moreover, the miners’ migration to the North West platinum mines in the past decade differed significantly from the historic oscillating migrancy enforced by apartheid legislation before 1994.

This paper assesses the factors behind the prolonged strikes in 2012 and 2014. It finds that the key issues were:

The failure to provide human settlements to accommodate the influx of miners as the mines expanded rapidly during the commodity boom,

The levelling out of pay increases when the commodity boom came to an end in 2011, combined with profound inequalities in work organisation and remuneration which meant the miners did not believe the mines faced a squeeze, and

The failure systematically to re-organise supervisory practices and work organisation in mining to deal with the oppression, poor communications and unjustified inequalities entrenched under apartheid.

To a large extent, the experience of the platinum belt paralleled challenges faced worldwide, as the surge in metals prices that lasted from the early 2000s through 2011 led to rapid growth in many mines in relatively remote rural areas. In the North West however, responses to these challenges by employers, workers, communities and the state built on practices and perceptions developed as part of the colonial and apartheid migrant labour system that historically centred largely on mining. Taken together, these responses failed to create living and working environments able to support either sustainable growth in platinum mining or secure, decent work and vibrant communities.

Industrial development and climate change mitigation have historically been opposed to each other. This is reflected in the industrial and climate change policy frameworks in South Africa. As a result of these two opposing frameworks and the disruptive and complex nature of the necessary transition to a low-carbon economy, the emergence of a climate change regime is seen as a threat and a risk to industrial development. Without immediate and ambitious action, the dichotomy between industrial development and climate change mitigation is moreover due to amplify. This raises the need to overcome the limited prism of analysis focused on incompatibility. This policy brief aims to contribute to filling the gap by investigating the interplay between industrial and climate change policies, the compatibility of the two frameworks and the options to manage the transition. This policy brief first argues that South Africa’s institutional arrangement and policy vision for industrial development and climate change are mainly mutually beneficial and provide an opportunity for a holistic approach. Second, the necessity for South Africa to position the country on short-term trade-offs associated with the cost of the transition is put forward. Third, the need for a strategic discovery and policy impact assessment process is ascertained.

The Sub-Saharan Africa (SSA) region has enormous potential to exploit its large reservoir of natural and agricultural resources through diversifying its resources from a predominantly agrarian to an industrial base. There is now consensus among African leaders and stakeholders that this is a path to the promotion of sustainable development and employment creating growth. Growth of the industrial sector brings with it more high-income jobs, upstream linkages to domestic firms and triple effects throughout the economy for both formal and informal workers. However, the challenges to attain industrialisation may be more daunting than in the past. Although there has always been a strong theoretical case for industrial policy, based on market failures, the practical difficulties including the identification of firms and sectors to target, survival of inefficient firms, rent-seeking and misallocation of resources are considerable. The emergence of global value chains has affected the nature of international competition. The prominence of multi-national companies in the global economy influences access to knowledge and technology. The availability of tariffs is becoming narrower, limiting room for maneuvering in industrial policy. In recent times many SSA countries have adopted new industrial polices or industrial development framework, including Botswana, South Africa, Uganda, Kenya and Ethiopia. There is a danger, however, that the lessons from past policy failures are forgotten. In this paper we attempt to give careful consideration to these past experiences.

Special economic zones (SEZs) emerged internationally as a policy to support industrial development in particular by providing for the introduction of targeted incentives and infrastructure. Internationally, despite their name, they are often effectively delinked from specific geographic areas in order to achieve these aims. This is especially useful where government wants to extend incentives to specific activities that lie outside designated zones, and where – as in South Africa – neither the provision of infrastructure nor spatial re-organisation of the economy are central aims of the SEZ programme.

The Renewable Energy Independent Power Producer Programme (REIPPP) was established to encourage new entry into the market.

The Regulatory Entities Capacity Building project review of the renewable energy sector includes:

Assessing the problems and difficulties in implementing South Africa's first option for the expansion of renewable energy through feed-in tariffs (REFITs), initiated by the Department of Energy, and its abandonment by the government.

Assessing, with the assistance of the National Treasury's Public-Private Partnership Unit, the motivations for opting to pursue competitive bids tenders through the REIPPP instead of the REFIT system.

Assessing the outcomes of the competitive bidding process as a regulatory mechanism with reference to its impact on market entry, expansion of capacity, investment, pricing and linkages to industrial policy and job creation.

The South African Ports Regulator, established in terms of the National Ports Act 12 of 2005 is a relatively new institution. Time taken to establish the institution has meant it has only recently begun to be effective. Over the past three years it has flexed its regulatory muscle with significant revisions to the tariff book and pricing proposed by the National Ports Authority. Studies have been conducted on the tariff adjustments and the stakeholder submissions to the Ports Regulator. However, limited work has been done on the effectiveness of the regulator.

TIPS’s assessment the regulation of ports in South Africa includes:

Reviewing the role of the regulator, linking this to the broad policy framework and economic development priorities of the government.

Assessing the work of the regulator, including through looking at case studies of ports regulation in other jurisdictions.

Considering the role of the regulator in contributing to the efficient and cost-effective operation of the ports, including the impact of the ports on the broader economy.

Considering the role of ports in attracting investment and supporting the growth of service sectors related to port operations such as ship repair, boat building and servicing the offshore oil and gas sector.

Considering the regulator looking at more than pricing, and going broader into the terms of access and quality of service of South African ports.

Looking at international experiences in Australia, India and South America.

Ports Regulation: Are we achieving the objectives of the Ports Act? Comparisons with Ports Regulators from India, Australia and elsewhere (19 November 2013). Presentation by Dr Sheila Farrell, Imperial College London:

This paper forms part of a broader research project TIPS has been involved in around common regional industrial policies. It provides an overview of key issues in global industrial policy literature. It begins with a brief examination of the link between industrial policy and development and the differences between the orthodox, traditional and subsequent structuralist schools of thought in terms of how structural transformation within an economy occurs. This is followed by a selective review of key debates and issues about what industrial policy is, including: the broad versus narrow industrial policy debate, the conforming to comparative advantage or defying comparative advantage debate, the specialisation versus diversification debate and the policy space debate.

This paper forms part of a broader research project TIPS has been involved in around common regional industrial policies. It looks at three examples of regional integration: the Association of Southeast Asian Nations (ASEAN), the European Union and Mercosur. The focus is on understanding the drivers and motivation for regional integration in different parts of the world. It looks into how integration was supported and directed, and specifically how these blocs deal with issues of common industrial policies. It aims to assist in understanding the supply and demand for deepening regional integration and how integration options and approaches can be designed to respond to highly specific contextual circumstances.

The absence of growth in intra-SADC trade in industrial products since the tariff phase-downs were initiated prompted by the ratification of the SADC Protocol on Trade in 2000 continues to generate interest amongst policymakers and other stakeholders as it appears that removal of market access constraint alone is not a sufficient panacea. While the paper observes that failure to make the factors of production such as labour, capital, enterprises and technology fully mobile across the region has contributed to continued supply side constraints, it is the failure to implement industry specific measures arising from an industrial policy that is the primary reason for poor industrial sector response to market opportunities in the region. Through a review of trade and industrial policies in the EU, ASEAN, NAFTA, MERCOSUR and SADC, the paper makes observations that could be lessons for SACU as it develops its industrial policy.

Countries in Southern Africa have only recently begun considering the possibility of jointly developing comprehensive industrial policies under the auspices of regional integration bodies such as the Southern African Customs Union (SACU). Regional co-operation in industrial policy design and implementation has the potential to both identify and capitalise on the productive synergies that exist between states, and to enhance the integrated performance of industrial sectors across borders.

The Zambian economy has undergone profound reforms in the last two decades. It has transited to a market economy from the previously centrally planned economy. As part of the economy-wide reforms, the country's industrial and trade policies have also been re-oriented to suit the needs of the market-oriented economy. This paper therefore reviews the evolution of Zambia's industrial and trade policies from 1964, when the country gained independence, to 2009. This period is divided into two: the first period being before the reforms in 1991, and the second period being 1991 – 2009.

The paper observes that Zambia managed to rapidly industrialise immediately after independence through direct establishment of state-owned enterprises and promotion of import substitution strategy. However, the performance of these firms remained unsatisfactory, often operating at less than full capacity. The sector failed to create linkages with the rest of the economy and could not generate adequate employment for the country. The trade policy during this period discouraged export sales and encouraged production of domestic consumer goods through the use of high tariffs and quantitative and foreign exchange controls. Government used the anti-export bias policies to industrialise. By 1991, the performance of these strategies proved to be unsustainable. Government introduced the Structural Adjustment Programme and re-oriented its trade and industrial policies towards the market. Government's role has changed from that of an investor to creating a conducive (mainly macroeconomic stability and licensing reforms) and incentivised environment for private export oriented industrialisation strategy. The incentives have included fiscal incentives and infrastructural support. The reforms have resulted in an increased production and export of manufactured goods by more than 300% between 1991 and 2008.

The paper focuses on the conduct of trade and industrial policies in Malawi, their linkages and impacts on the performance of the trade and industry sectors. The study establishes that Malawi has gone through three stages of trade and industrial policy. From focusing on the production and trade of a few agricultural commodities during the colonial era, the authorities shifted, in the post-independence era to industrialise through import substitution policies. Following poor economic performance in the late 1970s and early 1980s, Government adopted economic liberalisation policies under the Structural Adjustment Programmes (SAPs) which, in fact, caused manufacturing activities to decline during the SAPs period. Substantial policy reforms ensued aimed at enhancing the performance of trade and industry. Government has adopted and applied a range of policy measures aimed at boosting investment and export incentives and regional integration and miscellaneous trade agreements were pursued to expand the market. In spite of steps towards a favourable policy environment, little progress has been made in particular areas such as that of the diversification of exports.

This paper looks at the nature and extent of linkages between trade and industrial policies in Zimbabwe. The paper establishes that the trade and industrial policies are interlinked in Zimbabwe. The study indicates that trade policy is one of the implementation strategies of the industrial policy - further illustrated in this paper specifically using the example of the clothing and textile industry. The policies are strongly linked in that one focuses on production capacities and the other provides a platform for the exchange of the goods produced. Also, the paper highlights the fact that the two policies are dependent on regional integration.

The paper recommends that the country needs to create a conducive macroeconomic environment for the economic agencies. It is critical to restore and increase the country’s normal capacity utilisation and other sectoral linkages such as the agriculture, mining, tourism and construction which have been under severe stress in the past ten years. The paper suggests that while a strong focus has been placed on priority industries, the country must also give priority to other products.

This paper aims to establish the links between the industrial policy and the trade policy in Botswana. The paper finds that after gaining independence the Botswana government has deliberately targeted industrialisation as a strategy to overcome the high concentration of economic activities and welfare of the country centred on diamonds. The strategy aimed at creating an enabling environment for the establishment, growth and development of particular types of firms through financial support. The government also centered trade policy in negotiating for preferences for Botswana's products whilst securing import requirements at competitive prices. There is evidence, nevertheless, that the formulation of trade policy, such as tariff policy, was largely disengaged from Botswana's industrial policy considerations. Commitments under SACU and SADC affect Botswana government's use of trade policy for own purposes.. Partly combined moreover with the cession of industrial policy to South Africa for most of the pre- and post-independence period, the study generally concludes that the link between the Industrial policy and trade policy has been weak.

This paper argues that perspectives characterizing the trajectory of China's economic reforms as “reversing course” are misleading by not recognizing the current stage of Chinese industrial development and the policy initiatives adopted to steer the country towards widely-stated national objectives. As such, the paper aims to contribute to the growing analysis of lessons learned from China's development experience by highlighting the evolving nature of institutional mechanisms and policy instruments in banking and finance, industry and technology to promote learning and to deepen independent national productive capacities as part of a concerted “big push” by domestic firms up the economic value chain in strategic sectors.

The paper begins by first analyzing the key lessons learned (positive and negative) from China outlined by three recent World Bank working papers, before addressing the key oversight of these works, in setting out China's institutional 'toolbox' of policy instruments behind its ambitious, yet evolving, WTO-tailored industrial policy strategy.

South Africa has a peculiar industrial structure given its factor endowments:

production is capital intensive in sectors and concentrated in capital intensive sectors despite an abundance of unskilled labour. Part of the reason for this phenomenon lies in the development process of South African industry: it grew around the mining sector and its core sectors remain close to the minerals endowment up until today. A possible explanation for this path dependent development is the existence of forward and backward linkages between sectors that drive industrial development. We use an SVAR approach with realistic identification assumptions from input-output relations 'following a paper by Abeysinghe and Forbes (2005)' to estimate the effect of linkages between sectors on sectoral growth performance.

Year2008

OrganisationVienna University of Economics and Business Administration

South Africa has a peculiar industrial structure given its factor endowments: production is capital intensive in sectors and concentrated in capital intensive sectors despite an abundance of unskilled labour. Part of the reason for this phenomenon lies in the development process of South African industry: it grew around the mining sector and its core sectors remain close to the minerals endowment up until today.

A possible explanation for this path dependent development is the existence of forward and backward linkages between sectors that drive industrial development. We use an SVAR approach with realistic identification assumptions from input-output relations - following a paper by Abeysinghe and Forbes from 2005 that analysed trade linkages between Asian countries - to estimate the effect of linkages between sectors on sectoral growth performance. Impulse response analysis allows us to estimate the impact of a shock in one sector on other sectors of the economy and therefore points toward the 'pulling power' of various sectors of the South African economy.

Year2008

OrganisationVienna University of Economics and Business Administration